Déjà Vu: Xerox Fujifilm Deal Terminated, CEO Resigns (Again)
Haven’t I Read This Before?
Nope, this isn’t a repeat – the Xerox-Fujifilm deal has simply been announced, cancelled, reaffirmed and then cancelled once again. In a statement released Sunday night, Xerox announced the termination of the $6.1 billion Fujifilm deal.
Following the deal termination, Xerox CEO, Jeff Jacobson, and four other Xerox board members are (once again) stepping down as part of the new settlement agreement with activist-investors, Carl Icahn and Darwin Deason. The investors have appointed five replacements to the Xerox Board, including Keith Cozza as the new Chairman and John Visentin as the new CEO. This new Xerox board “plans to meet immediately and, among other things, begin a process to evaluate all strategic alternatives to maximize shareholder value.”
The Xerox statement blames the deal termination on Fujifilm’s failure to deliver audited financials of Fuji Xerox before the deadline in April, 2018. Additionally, the Xerox board cited “material deviations” between the late audited financials and the unaudited version provided previously. Given the recent Fuji Xerox accounting scandal and Icahn’s outspoken opposition to the existing terms of the Fuji Xerox joint venture, these inconsistencies are cause for concern. Icahn and Deason have voiced these concerns about Fuji Xerox in a number of open letters since January 2018.
Icahn & Deason Come out on Top
The activist-investors seem to be enjoying their victory in the contentious battle with Xerox. “We are extremely pleased that Xerox finally terminated the ill-advised scheme to cede control of the company to Fujifilm,” Icahn stated. “With that behind us and new shareholder-focused leadership in place, today marks a new beginning for Xerox.
Deason elaborated, “with the limiting Fujifilm agreement terminated, Xerox is now positioned to conduct a true, robust strategic alternatives process. John Visentin has spent weeks preparing himself to run the company and speaking to numerous market participants regarding strategic alternatives. Xerox is fortunate to have someone with his experience and preparation to lead it through this exciting and transformative time.”
Fujifilm Fighting Termination and Calls to Renegotiate Terms
Fujifilm, as reported by Reuters, is disputing Xerox’s legal right to terminate the agreement and is “looking at all options including bringing legal action seeking damages.”
According to the Wall Street Journal, Fujifilm will present the same merger offer to the new Xerox board. “We are not in a hurry, nor do we want a deal on any terms,” a Fujifilm spokeswoman said. “Fujifilm has its shareholders, and we will not accept a deal that is not rational or acceptable.”
Bloomberg reports that Fujifilm plans to file a lawsuit as soon as possible. Fujifilm President Kenji Sukeno stated at a Toyko briefing, “the contract that ties the two companies together is still valid and we will push for the legality of it. There was a legal contract that everyone agreed on, and after that a few shareholders wanted to put a stop to it.”
Japanese analysts warn that a “long renegotiation of price, terms” and “attempts to restructure the pair’s existing joint venture could damage both parties,” according to Reuters. “There is a large gap between our assessment and Xerox’s largest investors’ assessment of Xerox’s value,” said Ryosuke Katsura, senior analyst at SMBC Nikko Securities. “We think that it would be negative for both firms if a break-off in negotiations is followed by a protracted period of uncertainty.”